some observations from Next Fifteen CEO Tim Dyson

I have been trying to do some research on other PR firms so I can better understand the market we all operate in. Currently such research is a thankless task. It used to be quite easy. Until a few years ago you could look at league tables produced by people like the Council of PR firms and PR Week and it was easy to tell which firms were growing, which geographies were doing well and also what different sectors of the industry were fairing best. Not anymore. Thanks to the moves of the larger PR holding groups such as WPP and Omnicom to consolidate their PR revenues under one line in their annual reports (they use Sarbanes Oxley as the reason) we no longer have any meaningful tables.

Am I the only one that thinks this is bad for our industry? I believe it would benefit the industry to make public the performance of all the significant PR businesses that operate in the industry. Clients and potential staff would benefit by seeing which firms really were growing. Agencies would benefit by being able to see how well they were performing relative to their competitors.

I’ll be honest I don’t really understand the reasons why WPP et al are withholding their numbers. They say it is because of Sarbanes Oxley but I’m not sure I follow that logic trail. Having trawled through the various key sections of the act such as sections 302, 404 and 409, I can’t see any good reason why an agency’s revenues should not be reported. Indeed the only real requirement I can see under SOX that is perhaps an issue is that agencies would need to have good internal controls to ensure revenues were accurately being applied to the various subsidiaries. In truth given all agencies I know of, base their bonus programs to some extent on the revenue each agency generates, then unless they have bogus bonus programs, the revenue recognition is very likely recorded with great accuracy.

I’m willing to have someone tell my why SOX really does require WPP et al to report agency fees as one big number instead of breaking them out by agency but until someone does, I’ll continue to hold the view that SOX has provided a fig leaf for holding companies to hide behind.

I’m I the only one who’d like to see that fig leaf be removed?

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Earlier this year I attended a small VC event at which Jim Collins was giving his fantastic presentation on how to build great and enduring businesses. He did a marvelous job of both reminding the CEOs present of the management disciplines they need to adopt if they are to turn their businesses in to truly great companies. Several months have passed since I heard him speak but I was reminded of this speech when I noticed his ‘Level 5 Leadership’ article is being reprinted in the current HBR. What struck me is that if you look at the current leaders of the major tech players there is some correlation with his central thesis, that great companies have Level 5 leaders but not a complete correlation. Of course this could be a warning bell for the future of those that don’t appear to have Level 5 leaders, or it could be that Jim’s analysis doesn’t really apply to them.

Jim’s research suggests that Level 5 leaders have a common set of traits, namely their ability to build enduring greatness through a paradoxical combination of personal humility plus professional will. Now I can’t profess to know the CEOs of the all the major tech firms to the extent where my judgment is 100% accurate but from what I’ve learned over the years and from the insight others have given, I’d say that using media exposure as a guide the following people meet the Level 5 standard:

Sam Palmisano – IBM. Sam does work with the media but it’s clear that he’d rather talk about his company than himself.Mark Hurd – HP. Has any business publication managed to profile him with his involvement?Hector Ruiz – AMD. AMD has been slowly but surely gaining ground on Intel while Hector has stayed firmly below the radarBill Gates – Microsoft (I know he’s not CEO anymore!). Bill has never loved media attention but accepts its role. As the world’s richest man he can’t escape being on the cover of magazines from time to timeSteve Ballmer – Microsoft. Steve may be gregarious but he’s also not someone to blow his own trumpet.Paul Otellini – Intel. Since taking over as CEO he has hardly sought out personal publicity

Some may take issue with these choices and I should add that not that all of these are clients. I should add that I’ve not included CEOs such as Steve Jobs, John Chambers, Larry Ellison and Scott McNealy. I don’t know these people but the perception is that these people enjoy the media spotlight which goes against them being so called Level 5 leaders. If my perception is wrong then these guys all definitely count. It is interesting to note that Jim’s Level 5 criteria if used when hiring CEOs would have ruled out hiring someone like Carly Fiorina for the HP role.

If you think about this you arrive at something of a paradox. At one level PR people want their CEOs to do their part to raise awareness of the company and its goals. This often means them sharing some of their personal life with the public to add some human interest to an otherwise dull business story. If they do this too much then they become celebrity CEOs and by Jim’s definition, this would suggest they are falling short of being Level 5 leaders. So the logical conclusion you arrive at is that we can do all our clients a favor and make sure our CEOs stay out of the media.

Or should we? I’d love to see what other PR people think on this subject?

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Call it an after shock from the 2000 crash of the tech market if you like but I think we are starting to see another wave of challenges facing the tech PR market. Don’t read in to this that my businesses are having problems, thankfully they are not. However, events of the last few months have pushed a few agencies perilously close to the edge and I fully expect to see one or maybe two firms crash out in the next few months. The firms won’t be small fry, they’ll be businesses that have been around a while and have taken steps to build up internationally. Their demise will be a result of two equal and opposite forces: a drive in one direction to go global while at the same time being driven in the other direction to be more local. These are tough pressures for medium sized businesses to take on at the best of times. The agencies I see being at risk are ones that became too dependent on one or two clients and equally a handful of their staff. If this mix changes even slightly in such businesses, the results are not pretty. Take a look at the big pieces of business in the tech PR market to move and then also at what staff moves have taken place and you might see what I mean. I won’t name names right now as I’d actually prefer it if these businesses stay alive but let’s put it this way, if they’re still alive in six months I’ll be shocked.